Will Brexit hurt Russia?

Will Brexit hurt Russia?

Britain leaving the European Union would have an impact on the Russian economy and budget since it will lead to fluctuations in the financial markets and will create conditions for the volatility of oil and other assets. 

"Brexit already affected the markets. Since it affected the markets, the commodity markets, above all, it also affects the Russian economy and the budget, because the volatility of oil is partly associated with the rumors, discussions and expectations regarding Britain leaving the EU," Russia's Minister of Economic Development Alexei Ulyukayev expressed his concerns.

He also drew attention to the fact that London is acknowledged international financial center, which is very important for the capital, partly because many companies issue their bonds there. So Brexit will have an impact on all borrowers and all companies that work in the financial market.

A similar view is shared by the presidential adviser Andrey Belousov. However, in his opinion, the European Union will be affected by Brexit the most. 

"Right now we can only guess. Brexit, if it will indeed happen, will have systemic consequences, especially for the European Union, for the trade situation within the EU. The EU is our largest partner and closest neighbor. Despite the sanctions, we still have very close ties, almost 13 thousand companies from the EU are working in our country. So of course, such tectonic shifts in the EU will also affect us," he told journalists.

In an interview to Vestnik Kavkaza, a professor at the department of the stock market and investments at the Higher School of Economics Alexander Abramov explained that the possible impact on Russia will be indirect, in other words, it will be primarily associated with the risk of Europe's destabilization. "It will result in increase of the borrowing rates, in loss of the capital on some of the emerging markets. Basically, money that are still available for a number of structures even in view of the sanctions will become more expensive," he said. 

"The capital, while being afraid of destabilization of the global economy, will try to once again leave the emerging markets for more reliable, already developed," the expert specified.

Abramov also noted that ordinary citizens of Russia will be barely affected by Brexit. "Brexit may lead to various consequences of different severity, but I think that the most significant of them is the destabilization of world's financial system, which may indirectly affect the Russian banks," he assumed.

Professor of Finance and Banking Faculty of RANHiGS Sergey Hestanov also noted that even if the risks of Brexit are real, they will be very insignificant from the Russian economy's point of view. "A large part of our trade with the European Union and with Britain are energy resources, the demand for which does not depend on whether Britain is in the EU or not. Our imports from the EU are mostly consumer goods, which also won't be affected by Brexit. That is precisely why all concerns about the fact that Brexit may have a negative impact on the Russian economy are groundless," the expert explained.

"This is quite an important decision for individual countries, for individual companies of these countries. For us - it is abstract and not very serious problem, which, in comparison with other challenges faced by the Russian economy, is simply irrelevant," he stressed.

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